AmCham biz.hk April 2015 by The American Chamber of Commerce in Hong Kong

April 2015

GOVERNING WITH PRINCIPLE

DOUGLAS C HENCK CHAIRMAN AND CEO AEGON ASIA

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THE AMERICAN CHAMBER OF COMMERCE IN HONG KONG

FAST FACTS COMMUNITY AmCham celebrates over 45 years of promoting business and fostering greater trade ties and community service in Hong Kong

ACTIVITIES Members can access more than 400 programs, seminars, and conferences each year featuring top business and government leaders, industry experts and professional facilitators who address timely and relevant business issues. MEMBERS Over 1,700 members (40 different nationalities) from over 800 organizations, including multinational firms, small and medium enterprises, entrepreneurs, and non-profit organizations. COMMITTEES Our members can join and access up to 28 different committees covering industry sectors, professional service sectors, and special segments of the membership.

The American Chamber of Commerce in Hong Kong 1904 Bank of America Tower 12 Harcourt Road, Central, Hong Kong T: (852) 2530 6900 E: amcham@amcham.org.hk www.amcham.org.hk

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April 2015

Contents

Vol 47 No 4

COVER STORY Publisher

Richard R Vuylsteke

Chairman and CEO of AEGON Asia, as well as Chairman of the Asia Corporate Governance Association (ACGA), Douglas C. Henck discusses his vision for a higher standard of corporate governance in Asia Pacific

Editor-in-Chief Blessing Waung

Advertising Sales Manager Regina Leung

biz.hk is a monthly magazine of news and views for management executives and members of the American Chamber of Commerce in Hong Kong. Its contents are independent and do not necessarily reflect the views of officers, governors or members of the Chamber.

AMCHAM NEWS AND VIEWS 04 Editorial Amidst the hubbub about the recently approved third runway at Hong Kong International Airport, one thing is clear: the project needs to get off the ground in order to maintain the city’s competitiveness as a transportation and logistics hub

Advertising office 1904 Bank of America Tower 12 Harcourt Rd, Central, Hong Kong Tel: (852) 2530 6900 Fax: (852) 3753 1206 Email: amcham@amcham.org.hk Website: www.amcham.org.hk

07 New Business Contacts

Printed by Ease Max Ltd 2A Sum Lung Industrial Building 11 Sun Yip St, Chai Wan, Hong Kong (Green Production Overseas Group)

37 Mark Your Calendar

34 executives joined AmCham’s business network last month

Designed by Overa Creative Tel: (852) 3596 8466 Email: ray.chau@overa.com.hk Website: www.overacreative.com ©The American Chamber of Commerce in Hong Kong, 2015 Library of Congress: LC 98-645652 For comments, please send to biz.hk@amcham.org.hk Single copy price HK$50 Annual subscription HK$600/US$90

biz.hk 4 • 2015

16 CHAMBER TOPICS AmCham HK President Richard Vuylsteke traveled to Singapore for a conference held by Asia Pacific Council of American Chambers, to discuss topics such as economic cooperation, job creation, and infrastructure development

ENTREPRENEURS/SMES At the Innovation and Technology forum, held jointly by AmCham and the Australian and British Chambers of Commerce, top innovation experts discussed their insights and strategies for stirring entrepreneurial ingenuity in a city that desires local innovation

COVER STORY 08 Governing with Principle Chairman and CEO of AEGON Asia, as well as Chairman of the Asia Corporate Governance Association (ACGA), Douglas C. Henck discusses his vision for a higher standard of corporate governance in Asia Pacific

CHAMBER TOPICS

16 APCAC: A Regional Resource AmCham HK President Richard Vuylsteke traveled to Singapore for a conference held by Asia Pacific Council of American Chambers, to discuss topics such as economic cooperation, job creation, and infrastructure development

ENTREPRENEURS/SMES 22 Progressing Innovation in Hong Kong At the Innovation and Technology forum, held jointly by AmCham and the Australian and British Chambers of Commerce, top innovation experts discussed their insights and strategies for stirring entrepreneurial ingenuity in a city that desires local innovation

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22 CHINA BUSINESS

One of the hottest companies in China, having shattered global records, e-commerce giant Alibaba has both challenges and opportunities ahead in protecting its intellectual property. Legal counsel David Ho spoke to AmCham about what’s next

INTELLECTUAL PROPERTY 26 Protecting Alibaba’s Intellectual Property One of the hottest companies in China, having shattered global records, e-commerce giant Alibaba has both challenges and opportunities ahead in protecting its intellectual property. Legal counsel David Ho spoke to AmCham about what’s next

30 Collaborative Law Enforcement to Combat Prolific Forgers and Pirates Though counterfeiters and piracy infringers have grown increasingly savvy, the Hong Kong Customs and Excise Department works closely together with US law enforcement agencies to catch crimes such as faking merchandise and infringing content

TRADE & INVESTMENT 34 Exporting US Quality Worldwide Hong Kong, the United States’ sixth largest trading partner, remains a strategic market for the USDA, especially as a role model to other markets worldwide. Under Secretary Michael T. Scuse speaks to the future he sees of US products here and elsewhere

biz.hk Editorial

Board of Governors Chairman

Peter Levesque

Vice Chairman

Walter Dias

Treasurer

Tom Burns

Executive Committee Evan Auyang, Sara Yang Bosco, Steve Lackey, Ryan Mai, Alan Turley, Richard Weisman Governors David Adelman, Donald Austin, Anne-Marie Balfe, Owen Belman, Diana David, Sean Ferguson, Robert Grieves, John (Jack) E Lange, Seth Peterson, Catherine Simmons, Eric Szweda, Colin Tam, Jennifer Van Dale, Frank Wong, Patrick Wu Ex-Officio Governor President

James Sun Richard R Vuylsteke

Chamber Committees AmCham Ball Apparel & Footwear China Business Communications & Marketing Corporate Social Responsibility

Ryan Mai Mark Green Michael Klibaner Lili Zheng Charlie Pownall Oliver Rust CY Yeung

Education Energy Entrepreneurs/SME Environment Financial Services Food & Beverage Hospitality & Tourism Human Capital

Virginia Wilson Rick Truscott Laurie Goldberg Jim Taylor Derek Berlin Veronica Sze Mark Kemper Shanthi Flynn

Information & Communications Technology Insurance & Healthcare

Rex Engelking

Hanif Kanji Rebecca Harrison Intellectual Property Jenny Wong Gabriela Kennedy Law Clara Ingen-Housz Pharmaceutical Joyce Wong Real Estate Robert Johnston Edward Farrelly Senior Financial Forum Philip Cheng Senior HR Forum Bianca Wong Sports & Entertainment Ian Stirling Taxation David Weisner Trade & Investment Barrett Bingley Transportation & Logistics Gavin Dow Women of Influence Anna-Marie C Slot Jennifer Parks Young Professionals Michael Harrington

n March 17, Hong Kong’s Executive Council gave the long-awaited green light to third runway for the city’s brimming airport. However, to the chagrin of the airline, logistics and tourism industries, the project is estimated to be completed in a decade. To them, and to others, the airport’s newest addition can’t come soon enough. Hong Kong International Airport has long been a crown jewel in the city’s lauded transportation infrastructure. Last year, it came in first place for international air freight coming through the airport, and saw the third highest number globally of international passengers, up 6.2 percent from the previous year. But in order to maintain that competitiveness, the airport needs to continue to expand in size and accommodate the increasing number of flight movements, because if this trend of growth continues, it will reach its limit within the coming two years. While Hong Kong still maintains its status as a hub for the region, neighboring cities in the Pearl Rival Delta are ramping up their efforts to become major destinations. Guangzhou Baiyun Airport, for example, is the main hub of China Southern Airlines, and is also a main focal point for Shenzhen and Hainan Airlines. All of these airlines have been aggressively buying aircraft from the US, with the latter recently making headlines because of an announcement planning to purchase whopping 30 Boeing Dreamliner airplanes, for future international flights. Other international airports in the region are also expanding rapidly, with Shanghai, Seoul and Singapore’s traffic increasingly busy. Shanghai’s Pudong International Airport was a new entrant to the world’s top 30 busiest airports last year, having jumped 9.4 percent from its prior numbers. That number only stands to grow.

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THIRD RUNWAY’S THE CHARM Multiple American carriers have launched new international routes from Hong Kong to the US in the past year alone, including American Airlines’ flight to Dallas / Fort Worth and Delta Airlines to Seattle. These airlines also simultaneously launched routes from Shanghai. Next month, Cathay Pacific will launch its own direct flight from Hong Kong to Boston. In July 2012, AmCham published a cover story detailing the saga of the third runway. The three runway system would take place on a land formation of nearly 650 hectares of land to the north of the existing airport island, on which a third runway, related taxiways, airfield facilities and navigational aids would need to be constructed. According to Kevin Poole, the deputy director for projects with the Hong Kong Airport Authority, emphasized to biz.hk just how seriously the Airport Authority was making efforts to make the building “from the outset an environmentally responsible building. The building is truly as green as we can make it.” The goal then was to gain a platinum certification from the BEAM Society Limited using its green buildings assessment tool. There are numerous critics of the third runway, including environmental groups, who argue that increased noise pollution would adversely affect the neighboring communities. As of now, Hong Kong is in negotiations with

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Shenzhen officials as to whether there is airspace which can be ceded to the north, which would allow planes to avoid flying over Ma Wan. This is a major point of contention, as critics contend that to begin the project without first securing this promise is tantamount to allowing Chinese officials to demand civil aviation rights away from Hong Kong. As presented by the Airport Authority, the estimated HK$142 billion for the project will come from raising market borrowings, charging airlines, as well as departing travelers with an airport construction fee, excluding transit passengers. Now, with the feedback given by the government, it will have to go back and review, ensuring the feasibility of its proposals and implementing cost controls. The now proposed plan will, by 2030, enable the airport to transport 100 million passengers as well as 9 million tons of cargo. In order to move forward, there must be clarity offered on both the financial viability of supporting what will be the largest undertaking in Hong Kong’s infrastructure history, as well as in regards to the discussions with Mainland Chinese officials about airspace. With Hong Kong’s competitiveness being challenged on multiple fronts, the airport’s fight to preserve its status as a global hub is of the utmost consequence. There is truly no alternative.

www.amcham.org.hk

AMCHAM Means Business

Members Directory

Over 500 pages in three major sections, including a complete guide to chamber services, corporate sponsors and AmCham Charitable Foundation. This directory lists about 1,700 members from over 700 companies and organizations. ISBN 978-962-7422-31-0

LC 98-645651 NON-MEMBER PRICE HK$1500 US$195 Shipping costs: Local HK$45 (per copy) US/International US$50 (per copy)

MEMBER PRICE HK$800 US$104

AmCham Member Name: Title: Company: Address: Tel: Fax: Email: Website: copy(ies) of Members Directory Total: HK$/US$ (postage inclusive) payable to The American Chamber of Commerce in Hong Kong check# Bank: Charge to AMEX (US$) Diners (HK$) Visa (HK$) Master Card (HK$) Cardholder's Name: Card# Expiry Date: Issuing Bank: Signature: (Not valid unless signed) The American Chamber of Commerce in Hong Kong 1904 Bank of America Tower, 12 Harcourt Road, Hong Kong. Tel: (852) 2530 6900 Fax: (852) 3753 1208 Email: hchung@amcham.org.hk

New

Business Contacts The following people are new AmCham members: AIG Insurance Hong Kong Limited Michael Hanretta Head of Corporate Communications, Asia Pacific Rebecca Harrison Head of Client and Broker Engagement

American Club, The

Michael Pitsiladis Assistant Director of Food and Beverage Services

Asurion Asia Pacific

Sara Levy Senior Manager, Strategic Initiatives

Bain & Company (Hong Kong) Dale Cottrell Managing Director, Asia Pacific

BlackRock

Michael Klibaner Director, Head of Asia Pacific Real Estate Research

Deloitte Touche Tohmatsu Niall Archibald Associate Director George Audu Associate Director

Gregory D. Puff & Co

Frederick Fucci Partner, Akin Gump Strauss Hauer & Feld LLP

Hong Kong Trade Development Council Clare Wong Assistant Executive Director

Hong Kong University of Science & Technology

Grace Liang Head, MBA & Executive Education Development China, HKUST Business School Jitendra Singh Dean, School of Business and Management / Michael Jebsen Professor of Business / Chair Professor, Department of Management

Hongkong and Shanghai Banking Corporation Ltd, The

Google (Hong Kong) Limited

Ksenia Duxfield-Karyakina Public Policy & Government Relations Manager, Policy Strategy & Operations, Google APAC, Middle East, Africa & Russia William Fitzgerald Policy Manager, Public Policy & Government Affairs, Asia Pacific, Middle East, Africa, Russia Barbara Navarro Public Policy and Government Relations, APAC, Middle East, Africa and Russia

Kwon Lee Partner

Mitsui Fudosan Co Ltd Hong Kong Branch Emi Islam Assistant Manager Justin Li Deputy General Manager

O'Melveny & Myers Denis Brock Partner

Simpson Thacher & Bartlett LLP Kathryn Sudol Administrative Partner

Alex Lupis Managing Director, Head of Corporate Access and Client Management, Asian Equities

Thomson Reuters Hong Kong Ltd

Intel Semiconductor (US) Limited

Turner International Asia Pacific Ltd

CY Yeung Director, Corporate Responsibility

jba consulting engineers Keith Cheong Project Director

DLA Piper Hong Kong Anita Lam Of Counsel

Mayer Brown JSM

Jones Lang LaSalle

John B Mortensen Regional Director, Healthcare and Education Services Jane Murray Head of Research, Asia Pacific

KPMG

Cynthia Claytor Lead Editor

Gwen Livingston Executive Director, HR APAC

Universal Weather and Aviation Asia Jodi Brooks Marketing Manager APAC Katherine Hagan Director of Sales APAC Charlie Mularski Regional Vice President APAC

Weber-Stephen Products LLC

Blake Huang Vice President / Managing Director - China & Hong Kong

Mark Kemper Seconded Partner, Audit / Global Head of Leisure Arend Oldenziel Principal, Financial Services

View our other members at:

http://www.amcham.org.hk/component/amcham_users/?view=memberlist

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COVER STORY

Governing with Principle Chairman and CEO of AEGON Asia, Douglas C Henck is driven to elevate the standard of corporate governance in Asia Pacific. As the Chairman of the Asia Corporate Governance Association (ACGA), Henck is among the most qualified individuals in the region to take up this daunting task.

By Wilson Lau

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Douglas C Henck

Photos: Isabella Lai

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s a top executive charged with developing the emerging insurance markets in Asia in the 1980s, Douglas Henck came to understand the importance of corporate governance to all stakeholders of a company. “I love working in the insurance industry, because it really makes a difference to the lives of people,” Henck says. “In the emerging markets particularly, life insurance is the most efficient form of capital savings. Insurance is a critically important social benefit and product. But it needs to be sold ethically and in a manner that balances the interests of all the stakeholders. I’ve been privileged to work towards that goal for many years.” Henck has been invited to discuss corporate governance at the Executive MBA class of the Hong Kong University of Science and Technology, where he has asked the students to look at newspapers from their home countries for a week. They have each found half a dozen headlines on bribery and other offenses where individuals have clearly violated rules of corporate governance. Every time there is a violation of ethics, one stakeholder benefits at the expense of the others. It is a ‘win-lose’ situation. Ethical decisions come into play when executives try to balance the interests of all stakeholders to make it a ‘win-win’ situation, he believes. “In insurance, if I charge a customer more than I should, that’s bad for the customer and good for me. If I overcharge the customer too much and he is not going to buy any insurance, that’s bad for both of us. There is always a balance. [Good corporate governance] is not that difficult to achieve as long as an executive thinks through all the stakeholders [when making decisions], including the marketplace and industry.” Born and raised in the southern part of the United States, Henck studied mathematics at university and began his career at Aetna Inc in 1974. He qualified as a Fellow of the Society of Actuaries four years later.

In 1987, Henck was relocated to Hong Kong to set up Aetna International’s first Asian regional headquarters in the city. It was around this time when he began delving into corporate governance in great depth. Apart from several years working for the nonprofit Baha’i World Centre in Israel, Henck has spent over 23 years in Hong Kong. “We raised our family here,” he notes. Henck thinks Hong Kong has had several unique advantages over other cites in the region. The British colonial government bestowed a great structure with strong civil service, an independent judicial system, rule of law, and the Independent Commission Against Corruption (ICAC). The city also has advantageous geographical location. Hence, Hong Kong has become an attractive location for multinational corporations to set up their regional headquarters. This requires an independent judiciary, rule of law, a stable environment and a strong center for financial resources. It also involves, to a large extent, a vibrant stock market, sound financial services and banking. “This is where corporate governance comes in,” Henck says. “To compete and succeed in financial services, Hong Kong must set a world-class standard for all services, covering financial, accounting, auditing and consulting. That’s how I got interested in corporate governance. I joined ACGA in 2000. I’m passionate about the need in Asia generally and Hong Kong specifically for us to aspire to and work towards the highest possible standards of corporate governance.” The future of Hong Kong depends on whether it will become Asia’s financial service center, he notes. “Hong Kong needs to be on a global level, on a par with London and New York. If we don’t have the highest standards for listing in the stock exchange, trading rules, or proper audit for trading, Hong Kong will be relegated to a regional competitor.” Corporate governance is anything but abstract. For a corporation, it is related to how all stakeholders are

dealt with and whether they are all treated in an equitable manner, Henck believes. When a company has proper corporate governance in place, the decision-makers view their responsibilities as balancing the needs of all stakeholders for an optimal result. “An executive might want to maximize profit, but he also needs to treat all stakeholders fairly, including the customers, shareholders, labor, and management. It means paying fair wages to the employees and management

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has proper incentives and does not rip off shareholders. It does not mean just looking after the interest of the 20 percent controlling shareholders. All shareholders should be treated in a proportional way.” There is a list of objective elements for a company to adopt to enhance its corporate governance. For instance, it can create an audit committee for its board of directors, appoint genuinely independent directors on the board who look at issues from a dispassionate

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perspective, and establish a compensation committee made up of outside directors only. “We have a list of things that are indicative of whether a company has good corporate governance or not,” he says. But only fulfilling the requirements on this list is not sufficient. “It’s helpful in terms of raising awareness [among all in a corporation] if this list of indicators is inculcated in the corporation.” Apart from ACGA, Henck became active with AmCham Hong Kong

through various committees in the 1980s and eventually sat on the Board of Governors. He served as the Chairman in 1997, the year as the sovereignty of Hong Kong was returned to mainland China. AmCham Hong Kong has been actively advocating for American businesses in Hong Kong, China, Asia and Washington D.C. The issue of “Most Favored Nation” treatment in the 1990’s became the lynchpin by which the association’s opinions were sought in Washington and Beijing.

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“I was privileged to testify in front of the US Senate on the Handover and other political issues,” he recounts.

Corporate governance for the long term ACGA publishes its biennial “CG Watch – Market Rankings” that ranks 11 countries and regions in Asia Pacific, according to their respective corporate governance practices and standards. Hong Kong and Singapore have always come in first or second place. For the 2014 rankings, they were tied for the first place. “Neither Hong Kong nor Singapore is better than a ‘C’ on a global scale. The US is not up there with an ‘A’ either,” Henck notes. Corporate governance in Hong Kong still has much room for improvement, Henck reasons. For instance, a short-term mentality has continued to prevail in the business sector, with the local property market as an example. Meanwhile, genuinely independent directors sitting on the boards of companies are still relatively few. In Hong Kong, there have been critics voicing their objections against the decision by the Future and Securities Commission not to let the Alibaba Group go public on the Hong Kong Stock Exchange under the dual share listing arrangement. The group eventually had its IPO in New York last year. There has since been a formal request to allow future dual share listings at HKEx so as not to miss out on short-term opportunities. An important element in corporate governance is to protect the right of minority shareholders. One of the ways this can happen in the US is through a class action lawsuit. Hong Kong does not have this in its judicial system. When minority shareholders are cheated, there is almost no way for them to get any redress in Hong Kong. “Corporate governance is always about the long term. Sometimes we do have to give up the short-term profit of a particular listing to gain long-term benefits,” Henck says. “When Hong Kong has achieved a higher standard [of

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corporate governance], then it will attract more quality corporations, and only such corporations will be allowed to list here. The investment world will fully understand the investment prospectuses for IPOs [in Hong Kong], and that the audit is legitimate and practiced with professional standard.” “By contrast, if the city allows cheap listings, poor quality audit, and a poor prospectus to work its way through, the world will discount any listing on HKEx. That’s what happens in Korea today. Shares are discounted because they are on the Korean stock exchange.” In a survey among ACGA’s members, there’s recognition that if Hong Kong allows dual share listing, there’ll be a discount applied to Hong Kong shares of all companies by up to 20 percent. Our members represent an enormous percentage of the total assets invested in the city. So to look at the short-term loss of the fee from a listing versus the long-term implication of lowering the standard, it’s a fool’s game. Hong Kong needs to establish itself and aim to emulate and be better than New York or London. It should be the place in Asia for strong companies to list their shares.” Hong Kong also has its share of recent listings of mainland Chinese companies where the audit has been found substandard. Meanwhile, concern has remained for proper oversight of the accounting profession and auditors. Some have made suggestions to set up an independent group to oversee whether individual audit is done properly. In Hong Kong, the Future and Securities Commission set up additional rules five years ago whereby Hong Kong-listed companies would not be allowed to have any executive trading and any insider trading of any shares from the end of fiscal reporting period until the accounts are actually published. This was an effort not only to curtail insider trading, but also to eliminate the perception of such activity. “Although these rules were passed, the government has backed down and

watered them down due to the objections from many local tycoons. From a corporate governance viewpoint, this was a setback,” Henck notes.

Challenges for Hong Kong A particular issue in Hong Kong is there remains a relatively short-term mentality towards the business cycle, with the exception of big infrastructure companies. Short-term thinking is not conducive to corporate governance. For many years, Hong Kong’s economy has been dominated by a handful of families. Increasingly, all the large companies in the city are publicly listed with the vast majority of their shares owned by pension funds, mutual funds and individual investors. While Hong Kong has been built up by family-run enterprises, it recognizes that the vast majority of shares are owned by others, Henck observes. “It seems to me that there needs to be a transformation of thinking, a metamorphosis of management. Organizations will be equally responsible for all their shareholders and treat all stakeholders responsibly … when they practice sound corporate governance. In fact, for those companies that thrive in the long term, there is a clear correlation between well-managed companies and companies practicing good corporate governance.” When there is an upmarket for stocks, there will be a buying frenzy and new record share prices. By and large, companies with good corporate governance do not fare any better than those that don’t. This is because there is a rush for any shares and investors are not concerned about risks, Henck believes. “But in a down cycle, there’s a flight to safety. Shares of companies with strong corporate governance do much better.” Strengthening corporate governance begins with the top management. There are obvious ways to enhance corporate governance, and it requires the top management’s commitment to doing their best for all stakeholders, he

thinks. “Top executives need to make clear that there are genuinely independent voices on the board and that the company will be transparent in all its disclosures.” Diversity in the workplace is another key. Companies need to make a real effort to recruit individuals with varied backgrounds and experiences, Henck says. “The benefit that comes with having different voices, whether on the board or management, is that a company has people think about the interests of all stakeholders from multiple perspectives. It deals with the long-term benefits.”

Good communication is needed to ensure good corporate governance cascades to all levels. There can be frequent interviews with the CEO, and appointments at the executive level to look after such issues as compliance, ethics, and environment, social and governance. Employee education is also vital. “In my company, there isn’t a week goes by where employees are not exposed to some elements of corporate governance. It’s a general management issue. Once a company is set on that course with internal communication inculcating the principles and values

Asian Corporate Governance Association

he Asian Corporate Governance Association (ACGA) is a nonprofit membership association dedicated to promoting substantive improvements in corporate governance in Asia through independent research, advocacy and education. ACGA is funded by a membership base of more than 100 highly regarded organizations based in Asia and other parts of the world, including several of the world’s largest asset owners and managers. ACGA investor members manage more than US$15 trillion globally and hold significant stakes in Asian companies.

Chairman of ACGA Douglas C. Henck says the association was founded right after the Asian financial crisis in the late 1990s. “The founders thought the crisis had happened owing to a fundamental failure of corporate governance,” he notes. ACGA makes a lot of effort in the education of corporations and governments. “We are consulted by governments across the region. Like the highly visible biennial ‘CG Watch – Market Rankings,’ governments will get cranky if they drop in the rankings.” On the research front, ACGA publishes white papers. For instance, it has published a white paper on Japan’s

throughout the enterprise, then it will come naturally in terms of helping the rank and file to understand the corporate values.” At the end of the day, corporate governance is about ethics, Henck believes. “It’s about the ethical practices in the marketplace and ethical treatment by a company for all stakeholders in a fair and balanced manner. When a company has that value and a principle-based culture, then having the corporate governance cascade down to all levels of the company will be the least of its challenges. It’ll come naturally.”

adoption of a unique statutory audit function rather than an audit committee. “The paper looks at the pros and cons of the two systems and how to work through that. We are working on another paper looking at what it means to be sitting on the board [of companies] in mainland China, what are the responsibilities, and the particular intricacy of state-owned enterprises,” Henck notes. “We do government advocacy. We have advocated blocking the dual share listing in Hong Kong. We also advocate that companies need an independent group overseeing the auditors. In Japan, the government wanted to delist Olympus, but we advocated otherwise because it would take away the right of shareholders to buy more shares and have their votes counted.” Back in 1997, only one or two countries in Asia had some elements specifically for strengthening corporate governance in their regulations and laws, such as a public code of corporate governance, an organization overseeing the auditors, and rules against insider trading, Henck says. “Today every country has such code and done something about audit, and independent directors on the board. Some have done better than the others, but there has been clear progress over the years.”

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CHAMBER TOPICS

A REGIONAL RESOURCE APCAC – the Asia Pacific Council of American Chambers – recently expanded to comprise 29 AmChams in the region and held its spring meeting in Singapore. Several AmCham HK members participated in the conference and related meetings for chamber leaders. Richard Vuylsteke reports

his year’s annual APCAC conference, hosted by AmCham Singapore on March 11-13 at the Marina Bay Sands Expo and Convention Center, was attended by more than 450 private sector executives, diplomats, and government leaders from the region. The theme, “The United States and Asia – New Opportunities in the Pacific Century,” built on previous summits’ themes about Asia’s growth and global influence. Organized and executed by host chamber AmCham Singapore, the

conference also celebrated Singapore’s 50th anniversary as a nation. At the opening reception in Singapore’s new “Gardens by the Bay,” US Ambassador to Singapore Kirk Wagar emphasized US government and business engagement in Asia through increased economic cooperation, job creation, infrastructure development, and enabling the creation of new domestic enterprises. “The expanded trade engagement and our enhanced military cooperation with allies and strategic partners in the region underscore the US government’s

commitment to building a bright future in this region on all fronts – economic, cultural, political, and security,” Ambassador Wagar said. The conference included networking receptions, several keynote speakers, including five US Ambassadors posted to Southeast Asia, one-on-one meetings with US Foreign Commercial and Foreign Agricultural Officers posted to the region, and a selection of 12 panels covering regional and global business, economic, and political issues. “It was great to be able to meet officials from the US and the region in

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From left: Dwight Hutchins, Alan Chang, Hari Krishnan, Soma Ramasamy, Anneliese Olson

one place,” says Catherine Simmons, AmCham HK Board member and Managing Director and Head of Government Affairs, Asia Pacific, at Citi. “Overall there was a good range of speakers, an interesting program, and a great chance to meet people I have not seen for awhile, as well as meet new people. I found the Myanmar session particularly interesting, as well as the coverage of the politics and trade in the region.” Panel choices included a wide range of topics, including the Global and

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From left: Tad Wakamatsu, Pankaj Batra, Kim Hoang, Killick Datta, Greg Willis, Sachin Prasad

Steve Okun

Judith Fergin

Regional Economic Outlook, Innovation and Technological Disruption, Branding in Asia, South China Sea Issues, and Prospects for the ASEAN Economic Community. “I don’t usually have the ability to gain in-depth perspectives on the entire region from governments and companies on the ground in one setting — that was very useful,” says AmCham HK Board member Sara Bosco, President of Asia Pacific for Emerson Electric. “Hearing about the progress of TPP and TPA from the people who are actually working on the issues was particularly helpful, and

hearing ambassadors from five countries all in one panel was amazing. The opportunity for networking goes without saying.” “I managed to meet three senior commercial officers from the Philippines, Indonesia, and Australia, as well as the heads of AmCham from Cambodia and Philippines, and also renewed acquaintances from AmCham Mongolia and Japan—all relevant regions for Emerson,” Bosco says. For the first time in several years, attending AmCham Board members and chamber presidents/executive

Michael Zink

directors met over an early breakfast to discuss ways to increase coordination and support for regional chambers throughout the year. “The breakfast discussion was enlightening, as I did not have a good sense of the role of APCAC as another platform for information sharing and advocacy,” Bosco says. The chamber leaders discussed the possibility of having more board member involvement in APCAC throughout the year as a means to coordinate on chamber messaging to Congress, the development of more

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Steven R. Victorin

Jim Rogers

From left: Parag Khanna, The Honorable Joseph Yun, Brad Glosserman, Deborah Elms

targeted advocacy agendas, and to share best practices. “If there is a consensus that certain topics are effectively discussed and dealt with by APCAC as well as each individual chamber, I think Hong Kong should support this,” Bosco says. “For example, more coordinated efforts on the passing of TPP, APEC activities, and ASEAN Economic community development, could be areas of focus for our engagement.” At the breakfast, AmCham HK, which each year conducts business delegation trips to the region, reported

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on the usefulness of coordinating these visits closely with other APCAC chambers in order to reinforce local and regional advocacy topics. Over the past three years, these trips have included meetings with AmCham Board members in Beijing, Shanghai, Guangzhou, Chengdu, and Chongqing China; Hanoi and Ho Chi Minh City in Vietnam; Yangon, Myanmar; and Dacca, Bangladesh. Preparatory trips have also included Mongolia, Taiwan, Cambodia, and Thailand. The final conference event was a special session with Derek J. Mitchell, the

US Ambassador to Burma/Myanmar. This was of special interest to AmCham HK, as a tentative delegation trip is being planned for this year or next year. Given the election environment in the fall with officials most likely not being as available for meetings, the recommendation was to wait until 2016. Nevertheless, the Ambassador urged people to continue individual visits to the country as the business growth possibilities remain strong. For more information about AmCham HK’s activities in APCAC, contact Richard Vuylsteke (rvuylsteke@ amcham.org.hk).

WHAT IS

APCAC? 20

PCAC recently expanded its membership to 30 AmChams in Asia Pacific, extending from Japan and Korea in the north, to Australia and New Zealand in the south, and west to India and Sri Lanka (see list below). Overall, these chambers represent roughly 15,000 companies in the region, employ an estimated 10 million people, manage annual trade volumes in excess of US$400 billion, and contribute direct investments of over US$300 billion. APCAC’s mission is to improve the competitiveness of U.S. business in the Asia- Pacific region. APCAC members combine their resources and knowledge to develop a common understanding of regional issues, opportunities, and challenges facing the American business community in Asia-Pacific. APCAC issues include: support for Trade Promotion Authority and free trade agreements, including the TPP (Trans-Pacific Trade Partnership); reduction or removal of individual taxation of U.S. citizens working abroad (section 911 tax exclusion); removal of technical and administrative barriers to trade; and opposition to unilateral sanctions and other trade and investment issues. Three annual events bring chamber members together. Each spring a member chamber hosts a regional conference, bringing together AmCham leaders and members, government officials, and others to discuss current

business trends in the region and related social, political, and economic challenges. The conference is preceded by one-day coordination meeting of AmCham presidents/executive directors and also includes AmCham staff as appropriate. In June, approximately two-thirds of APCAC chambers (primarily from Southeast and South Asia) gather in Washington DC for three days of Doorknock meetings with US government Administration officials, Senators and Congressmen, and think tank scholars. Roughly a third of the regions’ chambers, including AmCham HK, take individual Doorknock delegations to Washington, normally between April and September. The fall APCAC meeting is limited to chamber presidents and executive directors, who share best practices on strategic and operational matters. Last year’s meeting was hosted by AmCham Mongolia, one of the most recently established chambers in the region. Throughout the year, APCAC chambers are linked by email with the Asia Division of the U.S. Chamber of Commerce in Washington, with traffic focused primarily on the status of trade-related legislation on the Hill. Former AmCham Korea Executive Director Tami Overby has for several years been the U.S. Chamber’s Vice President for Asia and has been a strong supporter of APCAC and great resource for individual chamber leadership groups. For more information on APCAC, see www.amcham.org.hk and www.apcac.org.

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ENTREPRENEURS / SME

Progressing Innovation in Hong Kong Top innovation experts share their insight on strategies for businesses to stir entrepreneurial ingenuity within their organization and how the city can push foward local innovation

By Nan-Hie In

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ong Kong has made incredible transformations over the last 150 years, having reinvented itself from a fishing village to a manufacturing centre to a financial services hub and more. “It’s in Hong Kong’s DNA to be constantly innovative,” says Egidio Zarrella, a clients and innovation partner at KPMG. However, he added that currently many inhabitants sense the city's need to make great leaps forward in light of much competition from neighboring cities such as Shanghai, Shenzhen and Singapore. “The government recognizes it, but now people are starting to see that Hong Kong has got to change.” How should the city advance further to remain competitive? How can companies from start-ups to major multinationals stir entrepreneurial ingenuity within their organization? These issues and more were covered at the first event of the Innovation and Technology Event Series, a forum by the American Chamber of Commerce in collaboration with the Australian and British Chambers. Four of the best minds on innovation, including Zarrella, shared some startling revelations that could help entrepreneurs and policy makers rethink how to approach innovation.

The Nature of Innovation The most eye-widening views stemmed from Darrell Mann, an engineer who participated in more 400 inventions and is the CEO and technical director at Systematic Innovations. The British expert dispelled the misconception that innovation is correlated with research and development and the company's revenue. “It doesn't matter how much you spend on research and development, as its impact on the growth of your company is going to be zero.” Such statement challenges many businesses and governments that pour funds into research and development. Additionally, only a fraction of innovation projects transform into successful, viable businesses. "We have

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Darrell Mann Richard Lancaster

Peter Smith

analyzed 4.5 million case studies and found the failure rate at around 98 percent; you've got a better chance of hitting the right number on a roulette wheel than being successful in your innovation project," he says. Entrepreneurial attempts fail for many reasons. One popular cause of failure is the “coordination factor,” where management structures inside an organization stifle innovation, says Mann. “The challenge for most organizations now is that they are set up as efficiency engines for operational excellence, but being good operationally and being good from an innovation perspective are two totally different things,” he explains. To be successful, one must identify which stage of innovation it is in first. He shared a five-level scale of innovation capability: seeding, championing,

managing, strategizing, and venturing (or societal innovation, the highest level). He ranks Silicon Valley, a technology and entrepreneurism capital in California, level five from this scale, thanks to its innovationencouraging eco-system. However, he ranks Hong Kong at a level one or two of innovation capability. “If it wants to be more successful, it needs to have more innovative processes," advises Mann. The high-profile innovator also shared some effective drivers of innovation. Innovative management direction is one example. He cited Korean tech giant Samsung as an example, which swung from a level one innovation capability ten years ago, to a level three currently, thanks to its leadership. “The CEO had a big mission, which was a mission statement to beat Sony.

That was a great way to get all their employees to understand exactly what their job was,” he says, adding that the leader gave the tools and methods needed to deliver this mission, which led the company to achieve this ambition. Another strategy is the long haul approach. “When people think they are headed in the right direction, they will keep going.” He says creating a sense of progress – by getting those early success stories – helps advance innovation in an organization.

Innovation Needs in Utilities Sector From an energy industry perspective, Richard Lancaster, chief executive officer of CLP Holdings, also took to the podium to stress the breakthroughs needed to progress the power landscape. While much technological revolution has dramatically shifted the worlds of computers and telecommunications thanks to powerful and efficient chips, the utilities industries did not achieve an equivalent rate of progress. “The laws of physics have constrained what we can do with

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From left: Sarah Clarke, Darrell Mann, Richard Lancaster, Charles Mok and Egidio Zarrella

energy,” he says, adding that current research and innovation in this sector is focused on squeezing the last 1 to 2 percent from existing technologies. “We have all the technologies needed to generate electricity from coal, nuclear power, gas, and renewable energy from a variety of sources – all those technologies have been invented more than a century ago. But to get the most out of them, there is still a huge amount of innovation and R&D needed,” explains Lancaster. Meanwhile, appetite for energy is escalating. He cites the example of powering a data center: 20 years ago, it required around 1 megawatt (or a million watts of power). “Today we're looking at a typical data center that requires 50 megawatts. By the end of this decade we will be looking at typical data center that require around 100 megawatts, one hundred times bigger than the data centers we had 20 years ago.” Lancaster says the technological breakthroughs to enable such scaling up of energy supply is lacking. Additionally, the executive says energy innovation should not be too focused on how we produce energy, rather how we consume and use power in future.

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From a Societal Perspective

Mann and Lancaster joined a panel with Zarrella and Charles Mok (legislative councillor who represents the information and technology sector) to discuss how the community can push forward in innovation. Mok pointed out the obstacles at the forefront of entrepreneurs’ minds, including market issues. “Many say our market is too small, and that our innovative products and services cannot get to the market.” The politician adds, “How can we create market demand big enough that lets some of these companies get out of their early stage to move on to a major stage so they can grow?” The lawmaker claims there is a dearth of venture capital funding for companies to grow big. “A lot of companies see big issues in trying to get venture funding. Whether there should be some government policies in terms of financial policies to allow, for example, crowd funding innovation ideas to encourage more venture level funding, or loans made available in Hong Kong for some of these startups are something the government should do.”

However Lancaster says the city needs visionary leadership more than money, citing Samsung's success. “Visionary leadership will get us looking outside the confines of our relatively small area,” he says. The energy expert points out that much of the resources are within reach, such as a highly educated work force. “We have all the ingredients here, but we need a leadership that will take us on an inspirational mission.” Mok revealed that the administration has been trying to play a bigger role in innovation, citing the latest example with the establishment of the innovation technology bureau (which hasn't come to fruition yet due to political deadlock at the local legislature). He added that many of the issues aired at the forum point to creating a better environment for innovation in the city. Zarrella concurs that a more innovation-friendly environment is needed in the city but prefers the government role to have hands-off approach than official meddling. “The nature of entrepreneurism is that it goes against what everyone else does including what corporations are doing. Being told what to do is not what they want, and that is not what government should do.”

INTELLECTUAL PROPERTY

Protecting Alibaba’s Intellectual Property Having shattered global records, e-commerce Alibaba has stolen the global spotlight with its massive amount of moved goods. David Ho, Alibaba Group’s legal counsel based in Hong Kong, speaks to the challenges and opportunities of intellectual property protection for one of the world’s most talked about companies.

By Liana Cafolla

ust about everything to do with Alibaba Group – the largest e-commerce business in China – seems recordbreaking. Its much-heralded initial public offering on the New York Stock Exchange in September 2014 set a record as the world’s biggest IPO when it raised $25 billion, surpassing the previous record holder, Agricultural Bank of China, which pulled in $21 billion in 2010. In market share terms, Alibaba is a giant that is reckoned to account for 80 percent of China’s e-commerce market. Its sales on last year’s Singles Day – a super sales day invented by the company which falls on November 11 – topped $9 billion, up from the $5.9 billion achieved in 2013, making it the world’s biggest sales event. With trading volumes of this size, it should perhaps come as no surprise that when the company has a problem – in this case, intellectual property protection – it will be on a similarly large scale.

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“IP is an important issue for us to manage on our e-commerce platforms,” said the group’s legal counsel, David Ho. “It’s one of the bigger challenges we have.” Ho made the comment following his presentation to AmCham members last month on the topic of Alibaba Group’s intellectual property initiatives from an e-commerce perspective. During the talk, he made no bones about the size of the challenge confronting the company, which he says is partly a reflection of the huge popularity of the Alibaba’s e-commerce platforms. “We face very unique legal and practical challenges in terms of IP protection because of the huge number of goods on our platform,” he said. “At any given time, there are approximately 110 million product listings on Taobao.com alone. On Singles Day last year, Taobao platform did over 100 million RMB in transactions just in the first 55 seconds. It ended up the day with 57 billion in transactions in that single day. So we deal with huge volumes, obviously.”

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Alibaba Group was founded in 1999 by Jack Ma, a former English teacher from Hangzhou in China, where the company is still headquartered. The group operates a range of Internet based retail and wholesale trading businesses, as well as an online payments business – Alipay, which is a separate company from the Alibaba Group – and cloud computing and entertainment services. The group’s now has four main e-commerce platforms. The first company to be set up, in 1999, was Alibaba.com, a B2B English-language platform, which has since been joined by AliExpress.com, an international shopping site that connects consumers to manufacturers and wholesalers in China. Taobao.com – a C2C business platform – and Tmall.com – a B2C site – are both Chinese language-platforms that cater mainly to the Chinese domestic market. The key difference between the English and Chinese sites is their regulatory systems. The two English-language platforms adhere mainly to international “western-centric” standards while the

two Chinese-language sites comply with Chinese standards “to a very large extent,” explains Ho.

David Ho

Because of the huge volumes and range of goods on offer on its platforms, the group is trying to rise to the challenge of establishing an IP protection system that is both systematic and “massively scaleable”, while at the same time setting up tailor-made and direct communication between the company and individual rights holders. “We understand an automated and systematic approach to things will create frustrations to individual rights-holders because obviously rights-holders have unique problems, each of their own,” says Ho. “Cooperation is not just a good practice for us, but a necessity for us.” Alibaba’s IP protection system has developed and continues to evolve based on rights-holders’ feedback, he says. Four protection programs are currently in place, two of which were launched on 1 April [2015]. Alibaba’s original notice-andtakedown system is linked to a progressive disciplinary system, with penalty points accumulating against sellers found to be selling counterfeit items. At

the first penalty level, sellers who infringe on IP get six points as a warning, rising to 40 points, at which stage their account is terminated. “Over the years, we have received mixed feedback from rights holders,” says Ho. “Some rights-holders have been frustrated with repeat infringements.” In response, a ‘3-strikes’ program was introduced in 2014 against serious and blatant infringement. “It is aimed at sellers of merchandise that is clearly counterfeit and merchants who deliberately create product listings to circumvent automated and human detection,” explains Ho. Sellers who infringe an identical IP rights three times are terminated immediately, without the use of the point accumulation system. On the first offence, infringers receive a warning letter. On the second offence, their product listings are restricted, and if they offend again, their account is terminated. Taking into account Alibaba’s dominance of China’s e-commerce market, the threat of termination can constitute a severe blow to companies, says Ho, especially for many Chinese SMEs who operate only on Alibaba sites.

The first of the two latest initiatives is a good-faith takedown system for Taobao, which was developed following feedback from rights-holders. To balance their needs with the need to maintain a fair operating environment, the system introduces a five-tier takedown system: good faith – normal – poor – bad faith – unclassified, and allows for rights-holders to move up and down the tiers according to their past performance. “If the rights-holder has a good track record of past takedown requests, then rights-holder will be placed in the first top tier of the system,” explains Ho. “If that rights-holder is to submit a takedown request on Taobao, we will remove product listings based on good faith, just as we do on Alibaba.com and Aliexpress.com. For the other rights holders which have a traditionally good and average rate of success on Taobao.com, they can also expect their processing time to be reduced to within seven days.” The second new initiative is a 4-strikes policy, which differs from the 3-strikes program by covering infringements of different IP rights. “You don’t need an identical IP infringement,” says Ho. “If a particular seller infringes any IP four times, then that particular seller will be terminated. It can remove repeat infringeing sellers more effectively.” Once terminated, it is not easy for a company to simply change its name

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and set up again to avoid losing its business. “It depends on which platform – for example, on Taobao and Tmall, it’s quite difficult to get back in because you need an Alipay account which is linked to the national ID of the seller,” Ho says. On the two international platforms, the company carries out onsite checks against some of the names, he adds. Consumers who are sold counterfeit goods on Taobao can submit an online complaint to the company’s consumer protection program, which Ho calls “fairly robust.” Successful complainants are compensated with three times the purchase amount. As well as working through its penalty systems and resolving problems directly with rights-holders, Alibaba carries out millions of anonymous test

purchases each year and sends the products bought to rights-holders for authentication. The group also cooperates with government agencies including the Consumer Product Safety Commission (CPSC), China’s State General Administration of Press, Publication, Radio, Film and Television (GAPP), and the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), as well as with trade associations such as the Motion Picture Association of America (MPAA), the International Anticounterfeiting Coalition (IACC), and the Quality Brands Protection Committee (QBPC). Speaking after his presentation, Ho says that resolving Alibaba’s IP challenge will be a process that will have to continue in tandem with

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progress in China’s IP protection path, adding that the history of intellectual property is China is relatively new. “About 36 years ago, China did not have an IP system, and over the past 36 years they have caught up in terms of regulations and legislations,” he notes. “Especially after getting into Weibo, China did modernize the legal system very rapidly, which means today China has a largely functioning and very robust IP legal machine. But of course, China being a developing country, the IP problem is part of the many problems to overcome as a society. I think Alibaba and our e-commerce platforms constitute a major part of China’s e-commerce, so as a result we are a reflection, essentially, of China’s e-commerce as a whole. That’s why our IP problems reflect China’s IP problems.”

Sponsors:

Collaborative Law Enforcement to Combat Prolific Forgers and Pirates Counterfeiters and piracy infringers have grown increasingly organized and tech-savvy. Albert Ho, assistant commissioner of Hong Kong Customs and Excise Department (HKCED), who oversees crimes such as faked merchandise and infringed content online, reveals the latest threats facing Hong Kong and how the department adapted to tackle these crimes.

By Nan-Hie In

Albert Ho

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ecently, Assistant Commissioner of the Hong Kong Customs and Excise Department (HKCED) Albert Ho learned he is the winner of a World Customs Organization award on coordinated border management. Homeland Security Investigations (HSI) and Customs and Borders Production (CBP), both US law enforcement agencies that work in collaboration with HKCED on various operations in areas such as intellectual property crimes, had nominated Ho for this accolade. Humbled by this achievement, the senior customs official who oversees all intelligence and investigation work, reflects upon the award's theme of “coordinated border management” as the future of combating counterfeiting and piracy, especially digital piracy. “The way ahead is not going to be easy because the problem now is multijurisdictional and transnational, as it's on the internet,” he says. It wasn't always this way. Catching prolific counterfeiters and pirates has always been a cat-and-mouse game, but how the city tackled these issues has evolved tremendously since 1997. Ho recalls back then when the enforcement approach was more local. At the time, DVDs and CDs had just emerged; around 1,000 small street stores and hawkers mushroomed across the city, selling fake goods and pirated software and films. So a special taskforce was established, which routinely went after these operators four to five times daily. Crime was reduced by 90 percent within 12 months, yet around 100 illegal operators persisted. “The problem was that they have became organized and they knew how to circumvent enforcement,” explains Ho. By 2000, amendments in copyright and trademark under the Organized and Serious Crimes Ordinance empowered HKCED to take more aggressive action against organized infringed goods operators. For instance, punishments levied on these syndicates got heavier. “The OSCO

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[let us] enhance the sentence upon conviction by 50 percent, so if the punishment was 4 years, we can increase it by [another] 2 years.” “Today it is difficult to find fake goods in Hong Kong in the physical market. But we still have problems mainly in two areas: [IP crimes via] transshipment through express cargo couriers and the internet,” says Ho. In 2014, the department detected around 850 IP crimes, the bulk of which involved transshipment and the internet; here lies the reality where IP crimes have become multijurisdictional.

HK-US Collaboration Unlike most customs agencies around the world, the HKCED has sole authority to investigate and prosecute IP crime in in the city, which means it takes its own initiative when necessary at the border or the market. “We not only have power in the boundary control points to make seizures in counterfeited and pirated goods, but we also have the power to carry out the investigation.” In simplest terms, this regime lets the department do their job effectively, but

it’s not enough. Collaboration is needed with other overseas counterparts to crackdown IP violators. His department works closely with the World Customs Organization and Interpol. Another great overseas partner is the US through Homeland Securities Investigations, Immigration and Customs Enforcement and the Customs and Borders Production. A highly successful example of this HK-US collaboration is through the Swift Intelligence Exchange System. In the past, counterfeit goods were trafficked through 20-foot containers. According to Ho, now counterfeiters separate the goods into 4,000 small parcels and deliver them through

express cargo channels. “That's why we need to cooperate with overseas enforcement agencies and the express cargo couriers to extend and widen our enforcement effect beyond customs personnel to express couriers, and beyond Hong Kong to overseas,” explains Ho. For instance, seizure data shared with both sides has helped block the flow of illegal goods through these channels in multiple operations. “Whenever customs in the US intercept any counterfeit products, they will have a report sent to us with all the details of the sender, consignee, description of the goods and so forth.”

“As a result the number of seizures after such cooperation has increased by around 1,000 percent over three years,” he says. In addition, cooperation with the logistics operators was integral to this success, notably DHL, UPS, FEDEX, TNT and S.F. Express. Two more logistics operators will join this network to work with the HKCED.

Electronic Recordation and Triage Centre

Customs need all the relevant information to investigate and prosecute IP violators; the cooperation with trademark or copyright owners is

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Combating Digital Piracy

essential to this process. “Sometimes the problem is, we found counterfeit goods in Hong Kong but cannot locate the owner [of the genuine goods],” says Ho. Their absence can be for many reasons, that this is not their main market or the IP holder overseas is not bothered to fight the case here. But their cooperation is essential to enforce the law. The Electronic Recordation and Triage Centre was established as a result. A high-definition internet-based television lets rights holder abroad to log in and verify to customs officials if the seized goods are genuine or fake. For urgent cases, the rights holder overseas can send a 3D printable file of

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the original product so the HKCED can compare the counterfeit goods with the 3D model of the genuine artifact. The ERTC encourages rights owners to help Hong Kong customs tackle IP crime in the city, says Ho. “Thanks to the ICE, they have helped us engage with a number of right holders to use the system; we are getting more recordations through the ERTC now,” reveals the customs official. Additionally, the HSI in the US have been coordinating with the HKCED to have US trademark holders record their brands in Hong Kong to help law enforcement to combat cases of infringed goods.

The joint efforts extend to the fight against online piracy. A case study example is the In Our Sites, Project Cyber Monday IV operation led by HIS, the National Intellectual Property Rights Coordination Center in Washington, D.C. for ICE, and Europol. The HKCED participated in this operation with the aim of shutting down rogue websites trading infringed merchandise. This operation net 706 domain names selling counterfeit goods. The Hong Kong counterpart acted on intelligence from the US agencies to seize 16 suspicious domains hosted in this jurisdiction. “Without such cooperation, we could not have shutdown of these 16 domains because the operators of those websites were not in Hong Kong – they never sold any product in the city, they sold goods to other countries,” explains Ho. According to the assistant commissioner, this is typical challenge in law enforcement worldwide. “Whenever IP crime is happening on the internet, it's bound to be difficult because one could operate a website set up in country A and country B, but he or she is physically located in country C.” He adds, “Because it involves many jurisdictions, you have to work with other jurisdictions to tackle this problem.” Amidst this reality, Ho also underscores the need to exchange expertise between different customs agencies. For example, at an upcoming workshop, enforcement officers worldwide will converge in Hong Kong to discuss how to overcome these challenges to protect intellectual property rights. HSI from the US and HKCED in Hong Kong will co-host this IPR Training Workshop slated for June this year. Online IP infringement has become globalized and organized courtesy of the internet, which has no borders. Ho says, “If you want to tackle internet IP crime, you have to cooperate with other customs jurisdictions or enforcement agencies.”

TRADE & INVESTMENT

Exporting US Quality Worldwide Currently the United States’ sixth largest trading partner, Hong Kong remains a strategic market for the USDA, especially as a role model to other markets worldwide in terms of access and quality control.

By Blessing Waung

ichael Scuse, the United States Department of Agriculture Undersecretary of Agriculture for Farm and Foreign Agricultural Services, had never been to Hong Kong before his visit in March. However, what he saw upon his first visit, he liked. “Hong Kong is our sixth largest trading partner behind China, Canada, Mexico, Japan and the combined countries in the EU,” Scuse says. “This is a very important market for us.” With its strategic geographical location, as well as a compliant, transparent government, Hong Kong is an ideal export partner for the US. “Hong Kong is a very easy place to export to,” Scuse says. “It’s unfortunate that other countries around the

world don’t use this as a model. And that’s one of the reasons why we look at the trade agreements to make it easier to do trade, to break down some of the sanitary barriers that we’re facing in other countries.” “If we could use this model, it would make trade so much easier for everyone,” Scuse says. “And we would be able to move a lot more products, give citizens of other regions and countries access to products that they may not have access to today, which I think that’s the great thing about Hong Kong – the variety and the access that you have.” Through this access, Hong Kong citizens are able to select and purchase many products from the US. “When you look at Mainland China and some other countries within the region, you

are looking at a lot of grain, and that’s not the case here in Hong Kong,” Scuse says. “You are looking at more high-end. You are looking at the wine. You are looking at fruits and vegetables.” According to reports from the USDA’s Foreign Agricultural Service, imports of high value food products from the US to Hong Kong have surpassed US$4 billion, making it the leading food supplier to Hong Kong. “I see a growing market here for many other products that we produce in the United States,” Scuse says. “When you look at the growth that Hong Kong is experiencing, as well as the level of income from the resident citizens, I look for us to continue expanding our market share.”

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From left: Mark Michelson, Peter Johnston, AmCham President Richard Vuylsteke, USDA Under Secretary Michael T. Scuse, US Consul General Clifford Hart, Alan Turley

Biotechnology In order to meet demands for products, Scuse says that the US is looking to new solutions, including doing more research and development in the field of biotechnology. “We need to start talking about biotech products, again other than yields,” Scuse says. “We need to talk about what biotech products are going to do for the environment, especially the climate change that is taking place today. If we are going to feed 9 billion people by 2050, the only way that we are going to do it is through science. We are not making any more land, so it’s going to take science.” According to Scuse, “Going forward, science and technology are going to be

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extremely important to feed the growing world population, so I think there is some opportunities for the United States and China to work together in the science technology area to increase food production as well as food safety.” In Hong Kong, there are no specific regulations pertaining to the labeling of biotech food products. In other countries, for example in the European Union, there is a delineation between conventional and biotech foods. However, Hong Kong’s stance on labeling is one where GMO products can be voluntary labeled, if vendors so choose. “I believe that our farmers and ranchers produce very best, high quality products be found anywhere in the world. And if you look at the growth that we have experienced, the last six

years have been the biggest six years for agriculture trade history of the United States. Last year, we broke the record again with US$152.5 billion worth of agriculture trade.” A large piece of the strategic puzzle is focused upon this region of the world, Scuse says, where the growth has been faster than any other. “If you look at just what it’s happened in trade in China, where in 2009 we were going approximately 12 billion dollars’ worth of agricultural trade to last year, just under 30 billion dollars’ worth of trade. That’s a significant in a very short period of time.”

Red meat Meat is also at the top of the USDA’s agenda, as Hong Kong granted

From left: AmCham President Richard Vuylsteke, USDA Under Secretary Michael T. Scuse, US Consul General Clifford Hart

US. beef cuts and offal products full market access on in June of 2014. “We have the best the best meat products I think that can be found anywhere in the world,” Scuse says. “Whether it’s beef, pork or poultry. With Hong Kong granting us access, hopefully, China will take those next steps and grant us full access for beef products.” The US’s main competitor for red meat exports is Brazil, which accounts for 39 percent of the chilled and frozen red meat category. However, restaurants or high-end consumers in Hong Kong still largely prefer US beef. Additionally, prepared and preserved red meats from China have more than twice the market share than that of the US, because of their price competitiveness and their preparation that ready-made for the products needed for typical Chinese dishes.

Transpacific Partnership In order to continue the success of the USDA, though, much depends on the passing on the Transpacific Partnership. “Those countries that are

part of the Transpacific Partnership represent 40% of the global GDP,” Scuse says. “So the potential for the increased agricultural trade if we can bring the TPP home and get it passed – what it means to agriculture is absolutely tremendous.” Negotiations are still ongoing with the twelve member countries on the TPP, but it remains one of President Obama’s primary trade agenda goals. “I think we are getting very close to bringing the TPP to conclusion. The one thing that we really and truly need to actually get it finished is for Congress to give the president trade promotion authority,” Scuse says.

Universal quality As Hong Kong enacted its Food Safety Ordinance in 2012 with higher standards to protect its consumers, including a registration program for food importers and distributors. Additionally, it requires traders to maintain their business records for better food traceability. According to Scuse, no matter who the end consumer is, the USDA is

committed to maintaining food safety standards that would the same for those consuming the products at home. “But again, we believe that with the products that we are producing, the safety that goes into those products. We are recognized throughout the world as having the safest products to be found,” Scuse says. “When you look at the quality of our products, if you look at the price point for the quality that you are getting, we believe there is a tremendous potential and opportunity for American agriculture. That’s one of the reasons why we are doing trade missions.” “In my travels, no matter where I go in the world, people in countries recognize the quality of U.S. products and they recognize the safety of U.S. products,” Scuse says. “The United States goes to great ranks to protect its consumers. And because of that, we’re also protecting citizens of our trading partners.” “We have one system. It’s a single system for our citizens and for our exports. The food safety standards are the same.”

biz.hk 4 • 2015

MARK YOUR CALENDAR Apr Cloud computing: What it really is,

why it matters and how you can really benefit Zane Moi, Amazon Web Services, Head of Business Development, Hong Kong & Macau Amazon Web Services, a subsidiary of Amazon.com, launched its first cloud services in 2007. Today, over 1 million companies in over 190 countries use Amazon's cloud computing services, making it one of the leading cloud computing service providers in the world. What does cloud computing actually mean, why does it matter, why is it changing the way in which companies innovate, the innate relationship between cloud computing and creativity, and what new business models are coming about as a result of cloud computing? Zane Moi leads AWS' business in Hong Kong and Macau where he has responsibilities around market strategy, regional business and ecosystem development. Prior to AWS, Zane founded a Big Data Analytics and Visualization startup called TreeCrunch, and prior to the startup, spent over a decade at smartphone maker BlackBerry where he held leadership positions in Canada, Australia and Hong Kong. At BlackBerry, he was most recently Regional Director for Hong Kong, Taiwan and Korea. He has a BA (Hons) in Economics from Wilfrid Laurier University and an MBA (Distinction) from the University of Hong Kong.

Apr Personal Branding for Corporate Professionals Workshop

Nidhi Kush Shah, Founder & Director, Alchemy Consulting This interactive workshop covers on how personal branding can help managers and leaders engage teams and grow their businesses. Learn why it is imperative for company leaders to build their own personal brands and to motivate their staff to do so. Through different interactive exercises, role plays and case studies, participants will understand how to identify their personal brand strengths and weaknesses, build their personal brand using offline elements, how to communicate and soft-sell their brand and best represent their organization. Nidhi Kush Shah is an experienced and passionate Keynote Speaker, Writer, Facilitator and Coach. She specializes in Personal Branding, Communication Skills & Intercultural Skills. In the last eight years, she acquired leadership and training experience across Australia, India, Hong Kong and China. Since its inception in 2012, her firm 'Alchemy Consulting' has rapidly gained popularity for providing unique, interactive and effective L&D solutions. Nidhi is works with clients from a wide range of industries including Arts & Luxury, Consulting, Financial Institutions, Legal & Law, Non Profit, Wines & Spirits & Universities to name a few.

Apr How Can the Potentials of Qianhai Be Fully Unleashed?

* Dr. Witman Hung, Principal Liaison Officer for Hong Kong, Shenzhen Qianhai Authority * Prof. Xufei Ma, Associate Professor, Department of Management and Associate Director, Center for Entrepreneurship, Chinese University of Hong Kong * Prof. Yinggang Zhou, Assistant Professor of Real Estate and Finance, School of Hotel and Tourism Management and Director, Center for Hospitality and Real Estate Research, Chinese University of Hong Kong Business School Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone officially became part of the “Twelfth Five-Year Plan” four years ago. It has two goals: one is to develop the cooperation between Shenzhen and Hong Kong in all areas of modern services, and the other is to be a testing ground for opening China’s financial system. Given these two goals, what is the unique positioning of Qianhai? Dr. Witman Hung is the Principal Liaison Officer for Hong Kong, Shenzhen Qianhai Authority. Witman has worked in the computer industry for more than 25 years. A well-known figure in the industry, Witman has extensive experience in management consulting, project management and outsourcing services, including management positions at Jardine One Solutions, Atos Origin, AT&T and KPMG. Prof. Xufei Ma has been closely observing the development of Qianhai and serves as the project director in charge of CUHK Center for Entrepreneurship’s collaboration with Qianhai eHub. He will be giving a presentation on Qianhai’s strategic role in cross-border e-Commerce at the panel discussion.Nidhi is works with clients from a wide range of industries including Arts & Luxury, Consulting, Financial Institutions, Legal & Law, Non Profit, Wines & Spirits & Universities to name a few. Prof. Yinggang Zhou has been studying the development of Qianhai for a number of years. In April 2013, he organized a joint workshop with the Qianhai Authority, in which he proposed a "Hong Kong-Qianhai Financial Shopping Paradise" to foster the cooperation and integration of the two areas

For information, see website: www.amcham.org.hk

Tel: (852) 2530 6900

Fax: (852) 2810 1289

Venue: The American Chamber of Commerce in HK 1904 Bank of America Tower 12 Harcourt Road Central, Hong Kong

2015 Apr 01

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Venue: The American Chamber of Commerce in HK 1904 Bank of America Tower 12 Harcourt Road Central, Hong Kong

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Time: 12:00 - 01:45pm (Sandwiches & beverages included)

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Venue: The American Chamber of Commerce in HK 1904 Bank of America Tower 12 Harcourt Road Central, Hong Kong

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Time: 12:00 - 01:45pm (Sandwiches & beverages included)

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Fee(s): Member: HK$280 Non-member: HK$400

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Time: 12:00 - 01:45pm (Sandwiches & beverages included) Fee(s): Member: HK$280 Non-member: HK$400

Fee(s): Member: HK$280 Non-member: HK$400

Email: byau@amcham.org.hk